A Lot of Stocks Have Crashed: How to Spot Opportunities vs Traps — Rahul Jain

[00:00:00] Speaker 1: Hi friends, Indian stock market has corrected a lot. In fact, when I'm recording this video, Nifty is down to almost 22,700 level. So imagine from 26,000 levels, it's down to almost 22,700 levels. And in fact, individual stocks are down by let's say 40%, 50%, even 60, 70% in some of the small cap pockets. Now the question is that can some of these stocks that have beaten down badly? Can these stocks rebound back when the market conditions improve? Because we know that right now the market conditions are really, really bad because of a lot of reasons. And the key question is that could some of these stocks rebound when the market conditions improve? Well, that is entirely possible because stocks also move in cycles. Some of the stocks will get beaten down because of bad market sentiments. Some will get beaten down because of excessive valuation. Some will get beaten down because earnings growth are not there. So we need to really find out what is causing the stock to get beaten down, get hammered down badly. Because once we understand the reason, we know whether there are chances of it rebounding back or not, because sometimes it happens that market is unnecessarily panicking for some of these stocks, right? So finding out the exact cause or the reason, at least we need to understand that, right? So in this video, what we are going to do, we are going to first look at how to go about finding stocks that have been beaten down badly. Number one, number two, then we look at some of the sample stocks and understand how to go about analyzing these stocks to find out what is the real reason. Is it a short term problem? Is it a long term problem? Once we understand that, we can at least understand whether there are possibilities of rebounds back or not. Okay. With that, let's get this video started. So the first thing we'll do is we'll go to Ticker Tip, a platform that I've been personally using since 2022, almost four years now. We'll click on screener here and we'll click on Indian stocks and start screening. Okay. Now, first thing we'll do is we'll remove all of these filters here. Okay. We don't want any of these things here. So let's get rid of all of this. All right. And the first filter I will use is market cap. And I'm going to look at all the stocks that have a market cap of more than 28,000 crores. Okay. 28,000 crores. I'll type here and I'll tell you why it is so. Okay. When I say more than 28,000 crores, you will see around 300 stocks coming up on your screen. Okay. So these are basically top 300 stocks that I have selected here. Okay. Now, the reason I have not selected the remaining 200 is because I personally feel that right now in the market, there is a big risk in small cap segments. Okay. Why that is so? I've explained that logic in my, this video on my Hindi channel, I talked about why I feel that small cap stocks right now are showing very, very high valuations. Earnings growth has been flat at index level. Of course, there are opportunities in the pockets, but overall small cap stocks to me present a lot of risk. That's why I'm not even including that in my universe. You may back to differ from me. And therefore, if you want to include all nifty 500 stocks, go ahead and do that. I'm going to run this analysis for top 300 companies. Okay. For that, I have to select 28,000 crores as the market cap. That is the minimum. All right. The second parameter that we are going to look at is how do we find out that out of these 300 stocks, which are the stocks which have corrected. Okay. Which are far, far away from their 52 week high. Okay. For this, I'm going to use two filters. So I'm going to type here away. Okay. Percentage away from 52 week high and percentage away from 52 week low. I'll exactly tell you what this means and why have I selected these two filters. So let me first go and choose these filters here. Okay. So let's first understand what is percentage away from 52 week high. What does this 34% mean? What does this 15% actually mean and why are we using it? Okay. So for example, let's imagine a stock in the last one year, the stock had hit highest price at let's say 100 rupees. So it started at 70, 80, went up to 100 rupees. Okay. That was the highest price. Now from that highest price, the stock started to correct. It went to 90, then 80, and eventually it went down to let's say 50 rupees level. And right now it is at 50 rupees level. Now tell me how much is this stock down by from 52 week high? From 100 rupees, it's come down to 50, meaning it is down by almost 50%, right? Now, if this stock were to recover back to its previous 52 week high, meaning if the stock had to go back to 100 rupees, then that will be a good recovery. But from it to go from 50 to 100, that will mean 100% gain here. Okay. Can you understand that? So here percentage away from 52 week high tells us that if the stock were to go back to the previous 52 week high, the potential upside here is the 100%. Okay. So that's what this number is telling you that this stock right now is 100% away from its previous 52 week high. That's what precisely this number is representing here. So if you see 34 here, that means that this particular stock is 34% away from its previous 52 week high. Okay. That's a very, very simple logic. Now, the reason we are including this is in the filters is because it tells us that if the stock were to go back to its previous 52 week high, what is likely to be upside? Because we want to know what is likely to be potential upside. Now, coming to the second filter, which is percentage away from 52 week low, what does this mean? And why are we using it? So again, let me take an example here. So I'm taking a very similar example here. Let's imagine there is a stock and the stock in the previous one year, last 52 week had hit around 100 rupees of highest price. From there, the stock started to correct, correct. And let's say it went down to 40 rupees of level. Okay. That was the lowest it hit. That is called 52 week low price. Okay. Now, from there started to bounce back, bounce back. And right now the price when I'm recording this video, let's say the price is at 50 rupees. Okay. Meaning the stock is down from its highest peak, which was 100 rupees. It is down to 50 rupees. Okay. But from the lowest point, which was at 40 rupees here, this stock is far away. How much? Only 10, which is around 20% of 50. Meaning that from 50 rupees, if this stock was to go back to the previous low, because it is entirely possible that the stock may fall from here, right? So if it were to go back to the previous 52 week low from 50 rupees to 40 rupees, that means it is 20% away from its previous 52 week low. This tells you the downside, potential downside, because the stock can go back to its previous 52 week high, or it can actually go back to its previous 52 week low. That is entirely possible. So basically percentage away from 52 week low is telling you how far the stock is, if the stock were to go down and it tells you a potential downside. Okay. That's why I've included this here in the column here, meaning that we now understand that if a particular stock rebounds back to its previous 52 week high, what is the percentage upside? And if the stock does not rebound back, in fact, it goes back to its previous low 52 week low, what is your downside? Okay. Now, of course we want to only filter those stocks where the upside is higher and the downside is the lower, meaning the stocks have been already beaten down. That is the entire crux of this. But we are now knowing what is the possible upside and what is the possible downside. Okay. So what I'm going to do is I'm going to put a filter here that give me only those companies where the percentage away from 52 week high is at least 20%. So give me anything which is more than 20%. And when it comes to percentage away from 52 week low, I'm going to say that somewhere between zero to 10%. So let me now put zero to 10% here. So let me go and put this here. So we get now 96 stocks. Okay. So these 96 stocks have been correcting. And now we understand what could be the potential upside if these stocks were to go back to previous 52 week high. And what could be the downside if these stocks were to hit the 52 week low. Again, we don't know what could happen. There is no guarantee that these will hit the 52 week high or come down to 52 week low. We don't really understand that, but we can at least start analyzing these stocks from here on. Now the next two, three criteria that we are going to use is valuation related criteria to find out whether these stocks are still trading at a higher valuation or lower valuation than its subsectors. So for this, what we are going to do is we are going to the add filter here and we are going to say, give me PE. So here you will see PE premium versus subsector, meaning that is the stock trading at a premium from a PE perspective versus its subsector. All right. So this is a pro filter here. And if you want to use pro filters in ticker tape, then you would need an annual subscription. I've given you the link for ticker tape. If you use my link, you're going to get 45% discount on annual membership. So let's add this filter here. The next one I'm going to use is PE premium versus subsector here. Okay. So let's add these two here. And clearly you will see some of these stocks are trading at a premium versus subsector. Some of them are trading at a discount. So the ones that are in minus that are at discount, the ones that are showing positive, that means they are trading at premium. Now, it doesn't really matter whether they're trading at premium or discount, because there are a lot of factors. A stock can trade at premium, still might be a good buy. Why? Simply because there are earnings growth. There is a reason for it to trade at premium. Okay. So we cannot really differentiate between these stocks here. But one of the very important factor that we have to use is forward peg ratio. Okay. That tells you P ratio as well as the earnings growth rate. Okay. Let me show you how to create that. It is not there in ticker tape readily available. I've actually created it. You can create custom filters. Let me teach you how to do that. Simply go to add filter here. And what you do is here, you will see, for example, custom filters. Okay. Click on that. Now, if you want to, let's say create forward peg ratio, which is P ratio divided by earnings per share growth rate, right? How do we create that? Simply we are going to say, give me forward P ratio. Okay. Which is a pro filter here, forward P ratio and say divide by EPS growth rate, but I want the one year forward EPS growth rate. Okay. So one year forward EPS growth rate simply tells you what is the earnings per share growth likely to be one year later. And this is an estimate. This is a forecast. This is not guaranteed, right? But we are trying to calculate what is the forward peg ratio. If the forward peg ratio is, let's say lower than one or 1.5, that means the current valuations are good enough and the earnings forecast is not looking bad at all. Okay. This is what we want to find out. We want to find out the combination of valuation with respect to the earnings per share growth rate. We don't want to look at just the valuations because that could be misleading. If a stock does not have earnings growth rate coming up, then the valuation will be lower. It could be a value trap. We don't want to get into that, right? So simply you can go ahead and create it and give this particular filter your name. Okay. Let's just say RJ and let's say forward peg ratio. Okay. You can just simply name it and just say, create an add filter. Okay. I've already created this. It's not allowing me to create a new one. So what I'll do is I'll use the previous one that I created, right? So I'm going to go back and say forward. I think I've already created that. Yeah. Forward peg ratio here. You can see this. I've already created. I've added this here. Okay. Now what we need to do here is look at only those companies that are showing me forward peg ratio of let's say lower than 1.5. Lower than one is the best ideally, but even if you can get to, let's say lower than 1.5, I think it's a decent shortlist to start with. So I'm going to say, give me only those companies which are showing me forward peg ratio of zero to 1.5. We don't want negative as well because we don't want negative earnings growth rate. Therefore now it gives me around 32 companies. Now these 32 companies, the list might change. Okay. I do not know when you are running this on ticker tape every day, the pricing change every day, the EPS growth rate might change even quarterly basis. It might change, right? So these names do not really matter. Please do not go and invest in any of these companies because I am running this query today on 21st of October. I do not know when you are watching this video. Some of this might be redundant. You have to restart this. I've given you the link of the ticker tape. I have shown you how to do this so that at least whenever you're watching this video, whenever you want to deploy this strategy, you can go and execute this yourself. I have taught you step-by-step process. Now these 32 companies that are coming right now, it could be let's say 25 companies for you when you run this. It could be 100 depending on how many stocks further fall. It really depends on many things, right? Now out of these 32 companies, how do we go and analyze these companies to understand what are the reasons that these companies are falling and the peg is still looking over. So let me take two or three sample examples so that you understand how to go about navigating through ticker tape and also bring some insights into these stocks. So the first sample stock that I'm going to analyze in front of you is let's say Bajaj Finserv Limited. So I'm going to go and open this into a new tab. Now, the first thing we'll need to do is first we go to the financials and have a look at the overall picture of what's happening to the company's P&L. Okay. I typically use annual growth view here. So you can just say annual and growth view, right? And what you will see is what's happening to the revenues. And you would note quickly that the revenues have been slightly moderating in terms of the growth rate. But if you look at the, for example, EPS earnings per share, it's been 26%, 8%, 10%. If you go back in the past, whether that has happened in the past or not, you can go and check. Yes. Sometimes they have given lesser growth. For example, here, 11%, 12%, but afterwards they have picked it up. Okay. 19%, 34%. So it's not that consistently every single year, they will grow like 25%, 30%, etc. Okay. Now, the second thing you will do here is that you will look at sentimental analysis. Very, very important here. It basically looks at the summary of the corn call results, the recent corn call results, and it tells you what is the management talking about. What are the sentiments from investors perspective, etc. It looks at and analyze and gives you a lot of things. For example, you can look at what are the challenges here. Okay. So if I go here and click on show me everything here, right? So come down here and have a look at, let's say all these challenges. So what you will note very quickly is that they're talking about their insurance business not doing well. Okay. Motor growth is not there, underwriting margin pressures. If you go and read that, you will understand that their insurance business is not doing well. Again, I'm not going into a lot of details here, but you can go and read about it, right? You can also read what is happening from a growth perspective. What are the positives? So for example, here, the company did around 19% growth in total income in the last quarter and the PAT grew by almost 18%, which is a healthy growth rate recently. I don't think there's any problem in that, right? Again, you can go ahead and read some of the positives as well and you get a good idea of whether this company is worth exploring further or not. By just looking at the sentimental analysis, you would know whether there are big risks or not. For example, here, in my view, I think it's worth considering and reviewing this company in a lot more detail. For example, if you come down here, you will see some of the presentations. So if I come down here beneath the financial statements, you will see investor presentations. Okay. Now, if you go here and quickly have a look at what's happening in terms of the growth rate, for example, you see the Q1 growth rate here. Okay. You look at the absolute numbers in terms of the revenues, 19% up, PAT almost 18% up. Okay. Now, the second thing that you need to know is that Bajaj Finserv is a conglomerate. Okay. It has a lot of subsidiaries. For example, Bajaj Finance Limited is a subsidiary of Bajaj Finserv. Bajaj Life Insurance, Bajaj General Insurance, Bajaj Finserv Health, Bajaj Housing Finance, Bajaj Financial Securities Limited. So all of these subsidies are, some of these are listed, some of these are not listed, but they all come and make part of FinServ. Okay. So now you need to start going into details of this company. And for example, have a look at what's happening to their insurance business. What's happening to their, for example, lending business. Here, if you look at insurance business, FY26, the PAT actually dropped. As I was saying that their insurance business seems to be a laggard as of now. But if you look at the lending business, it's doing well. Almost every single year basis, their PAT is growing up. And this is the larger chunk of the profit that is coming out of lending business versus the insurance business, right? So you can start to see some of these patterns when you go into a little bit of more details. Finally, what you need to look at is that, is this pressure short term? And what is the long term vision of this particular company? Three years, five years down the line. So they have stated it in their presentation here. For example, they're talking about growing their revenues at around 20% CAGR between 2025 to 2030. So companies aspiring to grow at around 20% CAGR from a top line perspective and their PAT, they're saying we are going to go 2.5 times by 2030. Okay. So this tells you where the company's direction is going to be in let's say slightly longer term view. Right now, the stock is under pressure because of various reasons. One of them is definitely their insurance business. There might be more red flags that you have to go and look at. This is how you go and assess what is the risk versus opportunity from a long term perspective. How much of correction has happened in a particular stock and accordingly you make your decisions. Now, like this, you can also go and analyze. I'll show you one another example where some of the sentiment analysis will literally stop you to not go further and waste your time. For example, let me talk about the second stock now. Now, let me pick up second sample company Tata Steels Limited. So let me open this in a new tab here. Okay. First thing we'll do is we go to the sentimental analysis here. Okay. And you will see here what's happening. If you look at the challenges here. Okay. So what are the challenges here? West Asia and global trade disruption pressure. So this is why the stock is hammered down. Okay. The company itself is saying is that because of West Asia related conflict, what is happening is that their supply chain has been disrupted. There is likely to be a raw material cost going up. And in fact, they've quoted the number around 1200 crores of unplanned cost increase in the quarter. Right. So it means the company is hammered down because of these problems and these problems are still continuing. Right. So that risk persist. In my view, I wouldn't even look at this company any further. Why? Because I can already see that West Asia conflict is not stopped and it is likely that in the next few quarters, their raw material cost might continue to go up. Now, this is how I do my analysis. It's not that you have to follow my process, but if you want to learn that this is how I do it. Right. Another company that you can take an example, for example, if you come down here and if let's say find Canara Bank Limited, which is a PSU bank, let's open this in a new tab here and have a look at what's happening here. Okay. So if you go to sentimental analysis, what do you see here? Okay. So this is July, 2026 summary here. What do you see is that, for example, click here in the challenges and immediately you see that what is happening here is that SMAs, which is the special mentioned account. Okay. So in banking stocks, you will have to look at NPAs, which is the non-performing assets or bad loans. But before a customer account becomes a bad loan, they go through something called a special mentioned account, SMAs. Okay. Which is that, let's say if I take a loan and I don't make my interest payments or capital payments for the first, let's say 30 days, then I am qualified as SMA zero. If I then don't pay interest next 60 days, then I might go to SMA one. So these are grading basically. So before a bank declares a loan account, NPA, there is a SMA. They try to recover the money because sometimes temporary, somebody might not be able to pay the money. Right. So these are called SMA accounts and these are the early signs of SMA accounts becoming NPAs. Okay. Now here, their SMAs have gone up. So that is genuine risk. It's not that it is not a genuine risk because these SMAs might become NPA. Okay. And here they are talking about from which pocket these SMAs are coming from, they are coming from MSME and retail. MSME is very sensitive to the rate hikes that we know. Right. So you can put two plus two together. There's definitely genuine risk here. Right. Having said that, has the company doing okay in terms of the growth, et cetera. So have a look at the positives and you would see that actually their advances have gone up by almost 18%, which is a very, very good growth rate. Right. But they might be lending to a risky customer or because of the MSME segment becoming more riskier due to the higher RBI rates, it is entirely possible that there is a genuine risk here. Definitely in this example, I would want to wait for the Q2 results to come out to see whether this SMA is actually impacting the NPAs or not, or is the Dalal Street only reacting mainly because of there are high SMAs. This is how you can sort of go risk assess what's happening in the company and make your assessment. You don't need to take a call right now. Some of these calls you could differ. You can say that I'm going to wait for the Q2 to come out and see what happens, whether some of these risks are actually manifesting itself or not, whether some of these risks are just the panic behavior. And accordingly, you can go and build your positions. I've shown you two, three examples here. I haven't really gone into a lot of details because this video is getting really long now, but hope that you can start from let's say 300 stocks narrow down to let's say 25, 30 stocks. And within those 20 to 30 stocks, you can identify, I don't know, three, four, five stocks where you see that the market has overreacted because of some fears, but the stock is looking good from a long term perspective and those could become the opportunities here. Let me also close this video with saying that this strategy is a risky strategy because if a stock has fallen down to 50%, 40%, there's no guarantee that it may not fall further. In fact, it could fall further. So this strategy is used by people who understand the exact risk of a particular stock. And if they feel that, you know what, the stock has gone down, but this is very short term. In the next two to three quarters, the stock can recover back because whatever pressure the stock is facing right now, they are likely to go away. This is the bet you're taking because in stock market, it's a game of probability. You cannot really say that this stock will definitely rebound back, but because the stock is already down 40, 50%, there is a chance that it could rebound back. And if it doesn't rebound back, at least the downside is limited. That's why I had used that column of what is the percentage away from 52 week low. At least it tells me where is my stop loss if I have to put a stop loss, right? This is how you can go and analyze these companies. None of these stocks were recommendations. I simply wanted to show you one way of going and filtering out stocks in this particular market. Of course, do not take unnecessary risk right now in the stock market. Be very, very tight in terms of which stock you're picking, which stock you're not picking. Market conditions are very, very bad right now. Okay. We do not know whether the market will go up from here on or could remain sideways for the next nine months, 12 months until this U.S.-Iran war really settles down. Okay. And there are, of course, other risks as well. But if you like this analysis, request you to hit the like button. Let me know in the comments, a simple thank you. And if you're learning something new, then subscribe to my channel. With that, I'm going to see you in my next video. Until then, keep rocking. [00:21:37] Speaker ?: Bye.